| The advertisements of mutual funds (MF) | | | | Interest rate risk, Currency risk, Commodity risk. |
| disclaims - "Mutual Funds are subject to market | | | | Equity risk - This type of risk arises due to |
| risk. Please read the offer document carefully | | | | changes in stock prices in which the MF invests. |
| before investing". The very purpose of this | | | | Interest rate risk - This type of risk arises |
| disclaimer is to meet the statutory requirements. | | | | due to changes in interest rates. |
| Only very few people would have heard it when | | | | Currency risk - This type of risk arises due |
| it is mentioned in the radio or television as it | | | | to changes in the foreign exchange rates. |
| flashes by at lightning speed. In print media | | | | Commodity Risk - This type of risk arises |
| (Newspaper, Magazines) it is published in | | | | due to changes in the commodity prices. |
| extremely small font. Only investors who know | | | | Offer document - |
| the statutory requirements would even be aware | | | | It is a document published by the mutual fund |
| of the statement because the advertisements, | | | | house containing very useful information about the |
| with 'namesake' disclaimers, are hardly educative. | | | | MF scheme (risk factors, initial issue expenses, |
| So, what is the mystery behind the 'flash' | | | | sponsor's track record, Fund managers |
| statement? The statement means that mutual | | | | qualification and experience, Other MF schemes |
| fund scheme invests the money collected from | | | | past performances launched by the mutual fund, |
| investors in instruments which are subject to | | | | pending litigations and penalties imposed, etc.) |
| market risk. Every investor of a MF should read | | | | The message behind the disclaimer is clear - It |
| the offer document carefully before they invest | | | | says that investments made by mutual funds on |
| their money with the fund house. | | | | our behalf are not completely risk free. It is prone |
| As an investor, you should be aware of two | | | | to all the risks that any other investment is |
| concepts - Market risk and Offer document. | | | | exposed to. The message from the mutual fund |
| Market risk - | | | | house is very simple but as investors we tend to |
| What do you mean by market risk? It is the risk | | | | ignore this and invest in mutual fund schemes |
| which can reduce the value of the investment | | | | without reading it. So next time, before you think |
| because of market conditions. The different types | | | | of investing do remember to read the offer |
| of market risk are as follows - Equity risk, | | | | document and understand the risk. |